william Gross Is A Fixed Income Fund Manager. He Managers Fixed Income Compare And Contrast Essay Help

William Gross is a fixed income fund manager. He managers fixed income portfolios on behalf of several clients. The current yield on all bonds is 8% p.a. with coupons paid annually
A client comes to William and asks him to manage a bond portfolio to immunize their exposure to an existing liability. The liability requires the client to pay $3000,000 per year at the end of the next five years (i.e. one, two, three, four and five years from today respectively). Calculate the dollar duration of your client’s obligation. (3 marks)
To immunise the portfolio, your client has two assets a zero coupon bond with a 2 year duration and a face value of $160,000 and a perpetuity of 3,500 per annum. What combination of face value zero-coupon bond and perpetuity would immunize your client’s obligation? (8 marks)